I was, until recently, Economics Editor of The Telegraph. You can find my book - 50 Economics Ideas You Really Need to Know - here.

Biggest expansion of Bank of England's balance sheet in two centuries

There are some interesting stories that have come this morning from the Bank of England's Quarterly Bulletin. Among them: the fact that households have seen their incomes safeguarded by the cuts in interest rates over the past year (but implying they will face a shock when rates start to rise); the point that markets are getting very jittery about the prospect of inflation in the UK, amid those worries about the UK's credit rating; also, something investigating why the trade deficit hasn't diminished despite the 20pc devaluation of the pound.

All interesting stuff, but one bit I find particularly fascinating is this chart from the section on markets and operations.

click on it for a bigger version

It is, as far as I know, the first time the Bank has investigated just how its £200bn programme of quantitative easing compares with previous episodes of central bank balance sheet expansions in the past. What it shows is that, as the Bank puts it:

These unconventional policy measures — alongside those to provide liquidity insurance — have led to a significant increase in the size of the Bank’s balance sheet over the past year. Chart 2 puts that expansion in a historical context: relative to annual GDP, the Bank’s balance sheet has become about as large as at any point in the past two centuries.

What I admit I hadn't realised, however, was the extent to which the Bank's balance sheet expanded in the wake of the Second World War. It's an interesting comparison: back then, too, the Government was facing a deficit of mammoth proportions in the wake of the war (actually higher than today's, at debt of well over 200pc of GDP, compared with the likely 100pc net debt could reach in the next decade or so). This wasn't quantitative easing in the sense that we have today, but in many senses the balance sheet expansion has a similar effect. It is interesting that today's episode of money pumping isn't quite as unprecedented as most of us assumed.